Demystifying Payday Loan Agreements

So you need a loan? Thinking about a payday loan? Although payday loans are a quick way to get money even if you have a poor credit rating, they are expensive short-term loans that you have to pay back from your paycheck, usually within two weeks. You will also have to satisfy the following criteria:

1. Prove to the lender that you have regular income;
2. Prove you have a permanent address;
3. Prove you have a bank account;
4. Give the lender a postdated check, or authorize the lender to automatically withdraw money from your bank account; and
5. Sign a loan agreement.

A loan agreement is a written promise between you and the lender: You promise to pay back money you borrow and both of you promise to abide by the loan terms.

The first thing you need to do is to read the loan agreement carefully to avoid surprises. The loan agreement between you and the lender — in the case highlighted below we'll call it ABC Payday Company ("ABC") — will spell out all the terms and conditions of the loan agreement.

The loan agreement details the amount of the loan, the amount of time you have to repay; when you have to repay the loan; special fees for the loan; any conditions associated with renewing the loan; what happens if you don't pay back the loan on time, and what adverse actions the lender may take if you don't repay on time. Smart borrowers read and understand the loan agreement before they sign their name. Because the text can be pretty complicated, Credit.com is going to walk you through a typical Payday Loan Agreement.

Keep in mind these four tips as you read through Payday Loan Agreement that follows, or any one that you consider signing:

• Be suspicious of provisions you don't understand. Ask someone to explain them to you.
• Never sign an agreement where the terms are missing — it should be completely filled in BEFORE you sign.
• Keep a copy of the signed loan agreement. Your copy of the agreement not only has conditions in case you default, but also payment terms and deadlines as well as contact information, and it's the only proof you have of your agreement with the lender.
• Make sure that all oral promises are included in the contract. If someone promises you something, make sure it is in writing.

Sample Payday Loan Agreement: ABC Payday Company

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT: To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver's license or other identifying document.

NOTICE: WE ARE REQUIRED BY LAW TO ADOPT PROCEDURES TO REQUEST AND RETAIN IN OUR RECORDS INFORMATION NECESSARY TO VERIFY YOUR IDENTITY.

The USA PATRIOT Act (15 U.S.C. § 1681v) was enacted after the terrorist attack on September 11, 2001. Section 326 of the Act requires financial institutions like payday loan companies, investment companies, insurance companies, banks, brokers, travel agents and money service businesses to:

• Verify the identities of applicants opening accounts;
• Maintain records of the person and the information used to verify the applicant's identity; and
• Verify whether the applicant appears on any terrorist watch lists.

To verify your identity, payday loan companies, like all other financial institutions, must collect and verify customer information including the following:

• The name of the borrower and co-borrower;
• Date of birth of all borrowers;
• Address (P.O. boxes are not acceptable);
• Identification number (either a taxpayer ID or Social Security number).

Once your identity is verified, ABC PAYDAY CO will cross-reference your name against the Office of Foreign Assets Control's Specially Designated Nationals List.

These requirements won't affect most applicants; however, foreign residents or U.S. citizens without resident status may have a tougher time opening new accounts.

Notice: A short-term loan provides the cash needed to meet an immediate short-term cash flow problem. It is not a solution for longer-term financial problems for which longer-term financing may be more appropriate. You may want to discuss your financial situation with a nonprofit financial counseling service in your community. You will be charged additional fees if you renew the loan.

Equal Credit Opportunity Act Fair Lending Notice

The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided that the applicant has the capacity to enter into a binding contract); because all or part of the applicant's income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with this law concerning the creditor is the Federal Trade Commission Equal Credit Opportunity in Washington, D.C.

The Equal Credit Opportunity Act makes it illegal for creditors to discriminate against consumers on the basis the criteria listed above.

Anyone involved in granting credit must abide by this law. The law also protects consumers and most businesses applying for credit.

GOVERNING LAW AND AGREEMENT TO ARBITRATE ALL DISPUTES: You have acknowledged that the key elements of this contract acceptance by us, approval by our underwriters, disbursement of loan proceeds and repayment of principal and fees all occurred, or will occur, in the State of Utah, and you and we agree that any controversies that may arise hereunder shall be governed exclusively by the laws of the State of Utah.

Arbitration is a means for legal matters between two parties to be resolved by a neutral arbitrator rather than a court. All claims, demands, disputes or controversies between you, the Company (its employees, officers, directors, members, agents or assigns), including disputes regarding the scope and validity of this Arbitration clause, and any loan you have had in the past, any loan you may now have, or any loan you may acquire in the future shall be subject to Arbitration as provided below herein. If you enter into the Loan Agreement, this Arbitration Clause is hereby incorporated into the Loan Agreement and made part thereof. You agree that YOU ARE WAIVING YOUR RIGHT TO HAVE A TRIAL BY JURY. This Arbitration Agreement shall apply to all claims, whether under common law or pursuant to federal, state or local statute, regulation or ordinance, or for claims of fraud, misrepresentation or for collection of the loan, and you specifically waive your right to bring, join or participate in any class action lawsuit. All Arbitration claims shall be resolved by binding individual (not joint or class) arbitration by and under the Code of Procedure of the National Arbitration Forum ("NAF") in effect at the time the claim is filed.

This agreement to arbitrate all disputes shall apply no matter by whom or against whom the claim is filed. Rules and forms of the NAF may be obtained and all claims shall be filed at any NAF office, on the World Wide Web at www.arb-forum.com, by telephone at 800-474-2371, or at "National Arbitration Forum, P.O. Box 50191, Minneapolis, Minnesota 55405." Your arbitration fees will be waived by the NAF in the event you cannot afford to pay them. The cost of any participatory, documentary or telephone hearing, if one is held at your or our request, will be paid for solely by us as provided in the NAF Rules and, if a participatory hearing is requested, it will take place at a location near your residence. This arbitration agreement is made pursuant to a transaction involving interstate commerce. It shall be governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-16. Judgment upon the award may be entered by any party in any court having jurisdiction.

Most payday loan agreements include a range of terms that favor the lender, like this mandatory arbitration clause above, and the clause that requires you to agree that you will not participate in class action lawsuits. This long section can be simplified by breaking it down into two parts:

1. The first paragraph is a governing law clause. A governing law clause informs you which jurisdiction's law will apply if you and the lender have a dispute. In this case, the laws of the state of Utah will govern the terms of this agreement.
2. The rest of the section informs you that if a dispute arises between you and ABC, the dispute will be resolved by means of arbitration. Arbitration is a procedure for resolving disputes between parties using one or more neutral third parties, called arbitrators, instead of a judge or jury.

Part 1
A 'governing law' or a 'choice of law' clause like this one mandates or commands that the definitions and terms of this contract will be interpreted under the laws of the state of Utah. Therefore, if you and ABC have a disagreement about your arrangement, the laws of the State of Utah will determine the outcome, regardless of where you live.

This is important to you for a couple of reasons. First, many states have consumer protection laws that restrict the terms of the loan. For example some states limit the number of loans a consumer can have, the number of rollovers, and the interest rate that may be charged. Utah law favors lenders, not borrowers, in short-term loan transactions. For example, in Utah there is no maximum loan amount, no limit on the interest rate a lender can charge, no limits on the Annual Percentage Rate ('APR'), no limits on the number of outstanding loans a consumer may take out at one time, no limit on the number of rollovers, and no cooling off period.

Some states require lenders to provide borrowers a "cooling off period" of a specific length of time. During the cooling off period a borrower can cancel the agreement for any reason without incurring a penalty. Cooling off periods provide borrowers protection from sales people who use high-pressure sale techniques to get a borrower to sign a loan that isn't in the borrower's best interest.

For more information about state laws that apply to payday loans, go to the National Consumer Federation of America.

Part 2
Arbitration is the process in which a dispute is heard and resolved by a neutral party outside of the court system. Any disputes between you and ABC must be resolved by an arbitrator, or group of people known as an arbitration panel, that will listen to each party's story, review the facts, and reach a conclusion, much like a judge or jury.

Because the U.S. Constitution grants you the right to a jury trial, most courts disfavor agreements where consumers are required to waive this right. Some courts permit such waivers if it is "knowing, voluntary and intentional." This is why the waiver is in large capitals — to draw your attention to the waiver so you cannot later claim you didn't know what you were signing. For a court to hold this clause as a valid waiver of your rights, the agreement must clearly state that you are required to agree to waive your rights, which it does. The language cannot be hidden in small text or buried in the agreement; it must be visible and clearly stated so people reading the agreement can understand that they are giving up their rights. This clause in the agreement enables the lender to claim that you (the borrower) knowingly, intentionally, and voluntarily waived your rights to a jury trial.

Binding arbitration is like a court proceeding because the arbitrator has the authority to render a decision and you are required to abide by the arbitrator's decision. Binding arbitration is one way to avoid court costs and legal fees, but that does not mean that you or ABC can't use a lawyer during the arbitration process. In fact, companies who use arbitration as a means of settling their disputes usually hire lawyers so they will have the upper legal hand to win the case. Many contracts (including this one) imposed by a financial institution like ABC on consumers who need quick money require mandatory binding arbitration in the event of a dispute. This is reasonable when the arbitrator really is neutral, but not good for you if the company writing the contract, ABC, is able to influence the choice of the arbitrator.

Basically this section means:

• You and ABC are required to abide by the decision of the arbitrator;
• The arbitrator's decision is final and cannot be disputed or appealed;
• ABC specifies who the arbitrator will be and who will pay for the arbitration proceedings (generally, the loser).

Keep in mind that arbitrators often have a strong financial incentive to rule in favor of companies that file cases against consumers because those companies are their most loyal customers. A company probably will not choose an arbitrator who it suspects will not rule in its favor.

This agreement to arbitrate all disputes shall apply no matter by whom or against whom the claim is filed. Rules and forms of the NAF may be obtained and all claims shall be filed at any NAF office, on the World Wide Web.

If the contract containing the arbitration clause does not specify the conditions for arbitration, the guide for arbitration becomes the Federal Arbitration Act (FAA). The FAA was enacted in 1925 and revised in 2000 under the Revised Uniform Arbitration Act (RUAA) as a means of curbing the number of court cases involving contract disputes.

If you or the lender chooses to arbitrate a dispute, both parties must follow specific rules published by the National Arbitration Forum about both the timing and the method of filing the complaint against the other party¹. If you don't follow these rules, the arbitrating body may choose to ignore your claims.

The National Arbitration Forum ("NAF") is one of the larges dispute resolution companies providing arbitration and mediation services to businesses. The company maintains a panel of over 1,600 arbitrators, mediators, and judges. In a California study conducted by Public Citizen², corporations chose to use NAF nearly 34,000 times, whereas consumers brought only 118 cases before NAF in the same time frame — a whopping 99.6 percent of the total cases were brought by businesses.

• In the more than 19,000 cases that went before an NAF-appointed arbitrator, 94 percent of the decisions went in favor of the business, NOT the consumer.³
• Biased decision-makers: Some studies by consumer advocacy groups reveal that the National Arbitration Forum is the most biased against consumers of the major arbitration organizations. Recent studies of the National Arbitration Forum arbitrations demonstrate that in arbitrations between consumers and businesses, 94 percent of the National Arbitration Forum's decisions are in favor of the businesses that fund its activities.

Your arbitration fees will be waived by the NAF in the event you cannot afford to pay them. The cost of any participatory, documentary or telephone hearing, if one is held at your or our request, will be paid for solely by us as provided in the NAF Rules and, if a participatory hearing is requested, it will take place at a location near your residence. This arbitration agreement is made pursuant to a transaction involving interstate commerce. It shall be governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-16. Judgment upon the award may be entered by any party in any court having jurisdiction.

NOTICE: YOU AND WE WOULD HAVE HAD A RIGHT OR OPPORTUNITY TO LITIGATE DISPUTES THROUGH A COURT AND HAVE A JUDGE OR JURY DECIDE THE DISPUTES BUT HAVE AGREED INSTEAD TO RESOLVE DISPUTES THROUGH BINDING ARBITRATION.

This is another clause demonstrating that you voluntarily and knowingly gave up your rights to a jury trial when you signed the agreement.

AGREEMENT NOT TO BRING, JOIN OR PARTICIPATE IN CLASS ACTIONS:
To the extent permitted by law, you agree that you will not bring, join or participate in any class action as to any claim, dispute or controversy you may have against us, our employees, officers, directors, servicers and assigns. You agree to the entry of injunctive relief to stop such a lawsuit or to remove you as a participant in the suit. You agree to pay the attorney's fees and court costs we incur in seeking such relief. This agreement does not constitute a waiver of any of your rights and remedies to pursue a claim individually and not as a class action in binding arbitration as provided above.

In this agreement, you are required to give up your right to participate in a class action lawsuit against the lender. A class action lawsuit is a legal proceeding in court where a group of people who have similar complaints against ABC are permitted to assert those claims on behalf of the entire group.

Most payday loan agreements like ABC include terms that favor the lender, like this clause requiring you to agree that you will not participate in class action lawsuits. This is your promise that you will not bring a lawsuit on your own or with anyone else against the lender, the lender's employees, the board of directors, loan servicer, or assigns.

In this agreement, ABC can assign (give) its rights to other people called assigns, or parties to whom ABC can transfer its rights. A right entitles one of the parties in an agreement to the performance of the other party as specified in the agreement. For example, by entering this agreement, ABC can assign its right to receive your payments against the payday loan to another party, like Bad Boys Collections. If ABC assigns its rights to Bad Boys, you will have the duty to pay Bad Boys, NOT ABC — and Bad Boys has the right to receive your loan payments.

Although ABC can assign its rights to another person or company, you cannot assign your duties to pay the loan to someone else.

A loan service is a business entity that handles:

• Monitoring loans
• Collecting loan payments
• Property taxes
• Insurance escrows
• Foreclosure on defaulted loans
• Payments including late payments
• Loan origination processes

SURVIVAL: The provisions of this Note dealing with the Agreement To Arbitrate All Disputes and the Agreement Not To Bring, Join, Or Participate In Class Actions shall survive repayment in full and/or default of this Note.

Two issues in this agreement will survive, or continue, to bind you, no matter what occurs. For example, the following two clauses survive even if you default on your agreement or payoff your loan obligation in full:

1. Disputes will be arbitrated; and
2. You will not participate in a class action lawsuit.

The Lender does not want to lend money to someone who intends to borrow money and later avoid paying it back by declaring bankruptcy.

BORROWER AGREES TO ALL OF THE TERMS OF THIS NOTE by signing and submitting the Agreement Below By agreeing to this Application you certify that all of the information provided above is true, complete and correct and provided to us, ABC, for the purpose of inducing us to make the loan for which you are applying. By agreeing below you also agree to the Agreement to Arbitrate All Disputes and the Agreement Not To Bring, Join Or Participate in Class Actions and acknowledge receiving a fully completed copy of this note including the Application Supplement page 2b. (This Application will be deemed incomplete and will not be processed by us unless agreed by you below.)

Sign this document by typing your full name in the signature box

Signature Box:

THIS IS THE FIRST OF SEVEN SIGNATURE OR INITIAL BOXES YOU MUST COMPLETE TO RECEIVE YOUR LOAN. PLEASE SIGN OR INITIAL EACH EMPTY BOX (AS REQUESTED) AND CLICK NEXT TO MOVE TO THE NEXT PAGE. PLEASE READ THESE DOCUMENTS CAREFULLY AS YOU ARE SIGNING.

Parties: In this Loan Note and Disclosure ("Note"), you are the person named as Borrower above. We are the lender, ABC Pay Day Co.

Federal Law requires lenders to disclose:

1. All of the conditions associated with borrowing money; and
2. All costs associated with the loan expressed as an annual percentage rate of interest.

Although the purpose of the Federal law is to enable consumers to compare the credit terms in one loan against other loans, credit terms are often not very easy to understand.

Annual Percentage Rate: The annual percentage rate (APR) is the cost of the loan on a yearly basis. The APR will always be represented as a percentage. The APR is not the same thing as an interest rate. The APR will be higher than the interest rate you are quoted since other finance charges and fees are included in the APR. The APR is supposed to represent the true cost of your loan so you can compare the cost of borrowing the $300 you want from different lenders. However, the rules used to compute APR are not clearly defined. The best way to compare loans is to ask lenders about the fees included in the APR.

Finance Charge:

Amount Financed: Also called the principal loan amount, this is the total amount of money financed, or the amount of money that you want to borrow from ABC — in this case, $300.

Total Payments: This is the total amount you will have paid to ABC if you pay ABC back on time as indicated in the 'Payment Schedule.' In this case, there is one payment of $390 IF you pay on time and your loan does not renew.

Annual Interest Rate: You can calculate the Annual Interest Rate of the loan:

1. Divide the total "Finance Charge" ($90.00) by the "Amount Financed" ($300). -> 90/300 = .30
2. Multiply the result from number one (.30) by the number of days in the year (365). ->.3 * 365 = 109.5
3. Divide the result from #2 (109.5) by the term of the loan (14 days) = 7.82
4. Move the decimal point two places to the right and add a percentage sign. The 7.82 becomes 782% — the Annual Interest Rate

Your Payment Schedule will be: 1 payment of 390.00 due on 1/15/2009, if you decline* the option of refinancing your loan. If your refinancing is accepted your existing loan will be extended to either a one Loan Period loan (4-9 day term), a two Loan Period loan (10-27 day term) or a four Loan Period loan (28-38 day term) payment schedule and you will pay the finance charge of $15 per $100 per Loan Period on the next due date. You will accrue new finance charges with every refinance of this loan. After your fourth refinance, your loan will be paid down by $50.00. This means your account will be debited the finance charge plus $50.00. We will repeat this process until your loan is paid in full. See Loan Supplement for additional information.

* To decline the option of refinancing you must contact us at least three business days before your loan is due.

Payment Schedule. This payment schedule specifies that you must pay back the loan in full on January 15, 2009. If you don't, your loan will automatically be refinanced, or renewed. Each time your loan renews you will be charged additional finance charges.

Some lenders like ABC Pay Day Co. insert clauses that require borrowers to take additional steps to actually repay the loan. That means that your loan may renew automatically if you don't follow these additional steps, even if you have enough money in your checking account to pay the loan amount in full on the date your loan is due. (See also the Notice in the Prepayment Section.)

It is very important to understand how lenders handle renewals. If you can't pay the loan off, and must renew it or roll it over into a new loan, it will cost you additional fees that are not calculated in the Annual Percentage Rate for the first loan. Borrowers are often surprised by how quickly one $300 loan can turn into $500 or $600. You should always be aware of the possibility that things may not go according to plan when you sign any contract. There are many things that can go wrong after a contract is signed.

• Some payday lenders automatically renew loans by electronically withdrawing the finance charge from your checking account on the next payday. If you don't have enough money to cover the finance charge or loan repayment amount, you will be charged insufficient fund fees by both the payday lender and the bank. Because you did not pay off the loan in full, the loan will be automatically extended one more pay cycle. Each time the loan is renewed you will pay additional fees for the original principal amount you borrowed.
• Some lenders automatically renew loans without reducing the principal amount, while other lenders require borrowers to reduce the loan principal with each renewal.

Security: This loan is unsecured

An unsecured loan is a loan made to you that is not secured by anything of value such as an automobile or some specific piece of property that the lender can take possession of in the event you default on the loan.

HOW INTEREST IS CHARGED: Interest under this Agreement will be calculated using the "add-on" method. Under this method Lender will add a Finance Charge (interest) to the principal balance in an amount of $30.00 for each $100 borrowed from the Lender.

Each time your loan is refinanced you will pay a $30 fee PLUS interest changes on the unpaid amount. The unpaid amount includes unpaid interest.

Prepayment: If you prepay your loan in advance, you will not receive a refund of any Finance Charge. See below and your other contract documents for any additional information about annual percentage rate, prepayment and default. The Annual Percentage Rate is computed as of the date the loan proceeds are paid to you or, if you are refinancing a prior loan, as of the date it is anticipated the loan proceeds will be paid on your account.
PROMISE TO PAY: You promise to pay to us the Total of Payments in 1 payment on the due date indicated and other charges, if any, as provided in this Note. If the name of your Depository and Checking Account number is inserted in this Note you authorize us to initiate one or more ACH debit entries to your Checking Account for the payment of the loan on or after the due date. You also authorize us to prepare and submit on your behalf checks drawn against the Checking Account for payment of the loan. While you may revoke the authorization to effect ACH debit entries at any time up to 3 business days prior to the due date, you may not revoke the authorization to prepare and submit checks on your behalf until such time as the loan is paid in full.

ACH is a system of transferring funds electronically between different parties. For example, ACH payments include:

• Direct deposit of payroll, Social Security, and other government benefits like tax refunds;
• Direct payment of consumer bills such as mortgages, loans, utility bills, and insurance premiums;
• Business-to-business payments;
• E-checks;
• E-commerce payments;
• Federal, state, and local tax payments.

In this section you are agreeing:

1. To pay the principal loan amount together with interest and fees in one payment on the due date (which is probably the date of your next payday);
2. That if you provide the name of your bank and checking account number (which you have done in this agreement), ABC has the right to debit your account for any portion of the amount you owe on the due date even if you have the entire amount owed in your account. If it collects only a portion, your loan will be refinanced for any unpaid amount.
3. That ABC has the right to prepare checks drawn against your personal checking account for the full payment of the loan.

Although you have the right to revoke access to your account up to three business days prior to the due date of your loan, you do not have the right to revoke ABC's right to submit checks on your behalf until your loan is paid in full.

Most payday lenders require that you provide your bank and checking account number and give the lender the right to prepare checks on your behalf. However, most consumer advocacy groups advise against doing so; if you fail to pay the loan in a timely manner, your personal account will be debited at the lender's discretion.

PREPAYMENT: The Finance Charge consists solely of a Loan Fee that is earned in full at the time the loan is funded. You may pay all or part of what you owe prior to the due date, without penalty. However, you will still be obligated to pay the entire finance charge set forth above.

At the moment you sign the agreement with ABC, you will owe them a loan fee, which is not refundable and must be paid in full no matter when you pay off your loan. Unlike finance charges on credit cards which are charged on the total balance owed, you must pay the full loan fee no matter whether you pay off the debt to ABC one day after you sign the agreement or on the actual due date.

The finance change, or interest, will NOT be reduced even if you pay your loan off before the date full payment is due. Although some states require lenders to refund finance charges for pre-payments of the principal loan amount, in this case you are NOT entitled to a refund of interest.

Under the terms of this agreement, it is possible that ABC may deduct just the loan fee from your bank account even if you have the full amount in your account if you have not followed the three-day pay-off notification requirement.

NOTICE:YOU MUST CALL US AT (800) 419-000 BETWEEN 9:00 A.M. AND 5:00 P.M. EST AT LEAST 3 BUSINESS DAYS PRIOR TO THE DUE DATE TO FACILITATE THE PAYMENT OF YOUR LOAN.

This provision places the burden on you to call the lender at least three business days prior to the due date to pay your loan. If you don't do this, the lender will claim that you failed in your duty to provide notice of your intent to pay your loan. Technically you can be charged additional interest or your loan could roll over into another loan, costing you more fees and interest.

Pay attention when you see the word "NOTICE." When you see the word NOTICE, it usually is a way for the lender to allocate some risk to you. In this case, ABC adds a condition on the repayment of the loan. That condition is to your detriment if you fail to call ABC at least three days before the date the loan is due and tell them that you want to repay the loan. If you don't call them within those three days, ABC is relieved of its obligation to terminate the loan, even if you pay off the loan in full and on time.

RETURN ITEM FEE: You agree to pay $30 if an item in payment of what you owe is returned unpaid or an ACH debit entry, the authorization for which was not properly revoked by you, is rejected by the Bank for any reason.

You owe ABC $30 for any item that is returned unpaid to ABC, no matter what your reason is for not paying.

BY SIGNING BELOW, YOU AGREE TO ALL THE TERMS OF THIS NOTE, INCLUDING THE AGREEMENT TO ARBITRATE ALL DISPUTES AND THE AGREEMENT NOT TO BRING, JOIN OR PARTICIPATE IN CLASS ACTIONS. YOU ALSO ACKNOWLEDGE RECEIPT OF A FULLY COMPLETED COPY OF THIS NOTE. APPLICATION IS SUBJECT TO APPROVAL.

NOTICE: YOU MAY KEEP THIS NOTE, WITHOUT SIGNING IT, IF YOU STILL WANT TO SHOP ELSEWHERE FOR CREDIT
RIGHT TO CANCEL: YOU MAY CANCEL THIS LOAN WITHOUT COST OR FURTHER OBLIGATION TO US, IF YOU DO SO BY THE END OF BUSINESS ON THE BUSINESS DAY AFTER YOU ELECTRONICALLY SIGN THE NOTE AND DISCLOSURE. To cancel, you must call us at (800) 814-5451 to alert us of your intention to cancel. You must also complete the information in this box, sign and fax it to us at (800) 419-1212. If you follow these procedures but if there are insufficient funds available in your bank account to enable us to reverse the transfer of loan proceeds at the time we effect an ACH debit entry of your bank account, your cancellation will not be effective and you will be required to pay the loan and our charges on the scheduled maturity date.

Signature: (X)__________________ Date:__________________

This is called a 'cooling off period.' Some states require lenders to provide consumers with a cooling off period. Others do not. In this case, you have a right to cancel this agreement after you sign it. However, you must follow the provisions in the loan agreement exactly for your cancellation to be effective.

• Call the 800-number no later than the close of business on the first business day after the business day you electronically sign and submit your signature to ABC.
• Important: You will need to know what ABC considers a business day. Many companies consider business days to be Monday through Friday. To be safe, you would want to cancel before the close of business on the day after you enter into the agreement, no matter what day of the week it may be.
• Note that the time corresponding to the "close of business" refers to the time zone in which ABC does business — in this case, Mountain Time Zone (for the state of Utah). It is a good idea to find out what time your lender closes for business so you will be able to effectively cancel the loan if you choose to cancel.
• Even if you cancel on a timely basis, your cancellation will not be effective if all of the money ABC electronically transferred to your account is not in your account when ABC tries to take back the money. If you spend any of the money ABC gave you, you will be legally responsible for the full amount of the loan as well any fees and charges associated with the loan on the maturity date (i.e., the date you must begin to repay the loan).

¹Specific rules published by the National Arbitration Forum:
http://www.adrforum.com/

²Public Citizen is a national nonprofit consumer advocacy organization founded in 1971 to represent consumer interests in Congress, the executive branch, and the courts. http://www.citizen.org/

³"How Credit Card Companies Ensnare Consumers," Public Citizen, 2007.